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MSP Full Form - Minimum Support Price

 Minimum Support Price

Minimum Support Price

  • MSP is Minimum Support Price that's the govt sets on agricultural product price to get directly from the farmers. Or we will say that MSP is that the minimum price that the farmers get for their crops above the assembly cost.
  • On agricultural product, the MSP rate acts as a safeguard to the farmer to a minimum profit for the harvest, just in case the open market features a lesser price than the cost incurred.
  • The Union Budget in 2018-19 announced that the MSP for crops will now be kept at 1.5 times the assembly cost with an objective to double the income of the farmers by 2022. and thus , accordingly, the govt has increased the MSPs for 2020-21 marketing season for Kharif, Rabi and other commercial crops. So now you may have understood that MSP is that the price that's fixed by the govt of the crops produced by the farmers. And it's the price that's paid by the govt to procure the crops from the farmers.
  • MSP is nothing but a guaranteed price which safeguards the farmers with a minimum profit for his or her harvest if just in case the open market keeps the lesser price for farmer’s crops.

How is MSP calculated ?

  • Finance Minister Arun Jaitley’s Budget speech in 2018 didn't specify the value on which the 1.5 times formula was to be computed. But the CACP’s ‘Price Policy for Kharif Crops for the marketing season 2018-19 stated that its MSP recommendation was supported 1.5 times the A2+FL costs.
  • The 1.5-times MSP formula was originally recommended by the M S Swaminathan, the National Commission for Farmer’s head and was also promised that 2014 Lok Sabha election by the BJP that it should are applied on the C2 costs.
  • Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020: Explained
  • Three variables are prescribed by the Swaminathan Committee to determine the assembly cost namely;
  • A2 :
    • It's the out-of-pocket expenses which is incurred by farmers like a loan for fertilisers, fuel, machinery, irrigation, etc. and cost of leasing land
  • A2 + FL :
    • Is the estimated value of the unpaid labour for harvesting crops just like the contribution of family members, etc. Additionally , it's paid-out cost.
  • C2 :
    • It's Comprehensive Cost which is that the actual cost of production. It takes into account for rent and interest foregone on the land and machinery owned by farmers further additionally to the A2+FL rate.
  • The ideal formula which is suggested by the Committee to calculate the MSP is: MSP = C2+ 50% of C2
  • And the 1.5 times formula to calculate the increased MSP is : 1.5 Times MSP Formula = 1.5 times the A2+FL costs
  • The demand of the farmers is that the 1.5 times MSP formula should be applied on the C2 costs. The govt after considering this stated that the production Cost is one among the most factors to determine the MSP. Also, the CACP considers all the costs in a comprehensive manner.
  • To determine the MSP, the CACP considers both C2 and A2+FL costs. For return, the CACP considers the A2+FL formula and C2 formula as a benchmark reference costs which makes sure that the MSP covers the assembly cost.

Reason behind Farmers Protesting MSP

  • As discussed above that farmers fear that these three farm bills which are gone by the central government will do away with the MSP because these three bills doesn't mention much about MSP or simply a little was mentioned.
  • But the govt has announced verbally that the MSP will stay and therefore the farmers find it hard to trust an equivalent.
  • Mainly, the farmers of Uttar Pradesh, Punjab, and Haryana are angry with the provisions of those Bills.
  • They’re afraid that these Bills could also be the platform that the central government is fixing for the replacement of the robust support system that's prevalent in their states for the purchase of their crops.
  • They know that MSP was a guarantee that was their safety since the green revolution of the 1960s kicked in and due these three farm bills it are often snatched away under the context of giving the farmers more playing ground and better platforms.
  • In these areas, the state-government driven crop produce procurement infrastructure is extremely good. Here, Procurement is Food Corporation of India at promised MSP to farmers and is said before every agriculture season which inspires the farmers to specialise in producing more yield. 23 agricultural crops have MSPs and therefore the governments primarily buy only rice and wheat.
  • The main fear within farmers is that these bills will kill the govt procurement process as well as the MSP. Also, we see most protesters from Punjab and Haryana because they're the most important beneficiaries of this safety net.

About the farmers of Punjab and Haryana

  • According to certain reports, nearly 89% of the rice produced by the farmers in Punjab is procured by the govt and in Haryana it's 85%. Therefore, farmers of Punjab and Haryana face nor price risk and are actually incentivized to grow paddy and wheat.
  • Also, it's been seen that the state has been facing a shortage of pulses, wheat and rice instead it's been in surplus in FCI’s godowns. Rice may be a water-intensive crop and therefore the farmers from areas with the shortage of water to grow rice are risky but an MSP assured within the end. As per the govt study “continuous adoption of rice-wheat cropping system in North-Western plains of Punjab, Haryana and West Uttar Pradesh has resulted in depletion of groundwater and deterioration of soil quality, posing a serious threat to its sustainability.” Further, these Farm Bills are encouraging the farmers to affect the massive corporate and therefore the farmers don't trust corporates.


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